1

FOUNDATIONS OF
ORGANIZATIONAL
BEHAVIOR
 Chapter Outline
2

 Organizational Culture
 Organizational Change and stress management
 Power and Politics in organizations
 Conflict Management
 Organizational design and structure
ORGANIZATIONAL
CULTURE
“Culture is the soul of the organization—the beliefs
and values, and how they are manifested. I think of
the structure as the skeleton, and as the flesh and
blood. And culture is the soul that holds the thing
together and gives it life force.” Henry Mintzberg
 Organizational Culture
5

 Culture is defined as a common perception held by

the members of the organization or a sense of
shared meaning.
 Organizational culture is the pattern of shared
values, beliefs, and assumptions considered to be
the appropriate way to think and act within an
organization.
 Organizational culture: A system of shared
meaning held by members that distinguishes the
organization from other organizations
Seven Characteristics
of Organizational Culture
6

 Seven primary characteristics define organizational culture:

1. Innovation and risk taking
2. Attention to detail
3. Outcome orientation
4. People orientation
5. Team orientation
6. Aggressiveness
7. Stability
 These dimensions range from low (meaning not typical of the
culture) to high (meaning especially typical of the culture).
 In many organizations, one cultural dimension is emphasized
more than the others and essentially shapes both the
organization’s personality and the way organizational members
work.
 Dimensions of Organizational Culture
7
 Culture Is a Descriptive Term
8

 Organizational culture is concerned with how

employees perceive an organization’s culture,
not whether or not they like it

 Culture is descriptive
 Do Organizations Have Uniform
9
Cultures?
 The dominant culture expresses the core values that
are shared by a majority of the organization’s
members
 Subcultures tend to develop in large organizations to
reflect common problems, situations, or experiences
of members
 Subcultures mirror the dominant culture but may add
to or modify the core values
 Strong Cultures Vs Weak Cultures
10

 In a strong culture, the organization’s core values

are both intensely held and widely shared
 Strong cultures will
 Have great influence on the
behavior of members
 Increase cohesiveness
 Result in lower employee
turnover
Culture’s Five
Basic Functions
11

 Defines boundaries
 Conveys a sense of identity
 Generates commitment beyond oneself
 Enhances social stability
 Sense-making and control mechanism
 Culture as a Liability
12

 Barrier to change
Culture is slow to change – even in a dynamic environment
 Barrier to diversity
Culture seeks to minimize diversity
Can embed prevalent bias and prejudice
 Barrier to acquisitions and mergers
Most mergers fail due to cultural incompatibility
 Creating Culture
13

 Ultimate source of an organization’s culture is its

founders
 Founders create culture in three ways
1. By hiring and keeping those who think and feel the same
way they do
2. Indoctrinating and socializing those employees to their
way of thinking and feeling
3. Acting as a role model and encouraging employees to
identify with them
 Keeping a Culture Alive
14

 A culture is kept alive in three main ways:

 Selection – seek out those who fit in
 Top management – establish norms of behavior by
their actions
 Socialization – help new employees adapt to the
existing culture
 A Socialization Model
15

 Pre-arrival – initial knowledge about the organization and own

unique ideas
 Encounter – exposed to the organization. Expectations are
measured against reality during this stage, and a misalignment
may emerge.
 Metamorphosis – member changes to fit within the organization
 Dimensions of
Socialization Programs
16

Intense Programs Moderate Programs

 Formal – new workers  Informal – new workers

separated for training immediately put to work
 Collective – group basis  Individual – one-on-one
 Fixed – planned  Variable – no timetables
activities  Random – on your own
 Serial – role models  Investiture – accepts and
confirms existing
used characteristics
 Divestiture – strip away
characteristics to build
up new ones
 How Organization
17
Cultures Form

 Success in employee socialization depends on management’s

selection of socialization methods and the closeness of new
employees’ values to those of the organization
 How Employees
Learn Culture
18

 Culture is transmitted to employees through:

 Stories – gain an understanding of culture by hearing stories
that present the past and provide explanations for current
practices.
 Rituals – or repetitive sequences of activities, can reinforce the
key values of the organization and provide insight into the
culture.
 Material symbols – Material symbols such as dress codes,
formal or informal, office size or style and perks for key
employees can denote who is important in an organization.
 Language – Language is another way to learn about
organizational culture as employees will express themselves in
certain ways to indicate membership in the organization.
Creating an Ethical Organizational
Culture
19

 A strong culture with high risk tolerance, low-to-

moderate aggressiveness, and a focus on means
as well as outcomes is most likely to shape high
ethical standards
 Managers must be visible role models
 Communicate ethical expectations
 Provide ethical training
 Visibly reward ethical acts and punish unethical ones
 Provide protective mechanisms
 Creating a Positive Organizational
20
Culture
 A positive culture is one that emphasizes
 Building on employee strengths
 Rewarding more than punishing
 Emphasizing vitality and growth of the employee
 Global Implications
21

 National and organizational cultures

 Organizations exist in a global context
 Must be aware of local and national cultures
 Suggestions and observations
 Organizations heavily dependent on foreign markets
and labor
 National culture does influence organizational
culture
 All managers must be culturally sensitive
 Implications for Managers
22

 Changing organizational culture is not easy, expect

it to take years
 Hire people who “fit”
 Ensure that employees know the right way to do
their job
 Work to create an ethical culture
 Keep in Mind…
23

 Organizational culture develops over time and

reflects deeply held values to which employees
are strongly committed
 Ethical and positive organizational cultures can be
created – methods differ
 National culture influences organizational culture
ORGANIZATIONAL
CHANGE AND
STRESS
MANAGEMENT
Organizational Change Defined
 While the general concept of “change‟ is defined
as just “a new state of things, different from the old
state of things”, organizational change is more
difficult to define.
 Organizational change may be defined as “a state
of transition between the current state and a future
one, towards which the organization is directed.”
 Forces That Stimulate Change
 Uncertain economic conditions;
 Globalization and fierce world competition;
 The level of government intervention;
 Political interests;
 Scarcity of natural resources;
 Rapid developments in new technology and the information
age.
 Increased demands for quality and high levels of customer
service and satisfaction;
 Need for greater flexibility in the structure of work
organizations and patterns of management;
 The changing nature and composition of the workforce
Types of Changes
 Organizational change may be categorized in
many ways.
 The most comprehensive of them is the one that
describes change depending on three main
dimensions: origin, result and process of change.
 Origin of Change: from the environment in which the
organization functions (unintentional changes) or by
the organization’s initiative (intentional or deliberate
changes).
Types of Changes…
 Results: change may be related to external key-
events, reactive changes (changes initiated as
reaction to an event or a series of events) and
anticipatory changes (as the name shows, they are
initiated in anticipation of events).
 Process: The most popular way to classify
organizational changes is according to how radical
or incremental it appears to be.
 Look at the following table to see different
approaches of classifying organizational changes.
 Types of Changes…
Classification Main difference
Gradual change Supports prime structure or current order
Revolutionary change Destroys and replaces current structure and
order
Incremental (evolutionary) change Is continuous, at a small scale
Transformational (revolutionary) change Has no continuity, at large scale
Change of the 1st degree Change in the system’s basic rules
Change of the 2nd degree Paradigmatic change that changes the
system’s meta-rules (rules of rules)
Convergent change Compatible with the existing organizational
structure
Frame changing (transformational) change At system level, a simultaneous change in
strategy, power, structure and control
Evolutionary (incremental) Low number of changes, one at a time
Revolutionary (dramatic) Increased number of extreme changes
Evolution Uses dominant type of management to
obtain stable growth
Revolution Due to a problem, it creates a new mgt style
to ensure continuance of growth
Planned Change
 Planned changes are proactive and
purposeful.
 Intentional and goal-oriented activity

 The Goals of planned change:

 Seeks to improve the ability of the organization to

adapt to changes in its env’t.
 Seeks to change employee behavior.
 Resistance to change
 People tend to resist change, even in the face of
evidence of its benefits
 It is easiest for management to deal with resistance
when it is overt and immediate.
 The greater challenge is managing resistance that is implicit
or deferred.
 Major forces for resistance to change are categorized by
individual and organizational sources.
 Individual sources of resistance reside in basic human
characteristics such as perceptions, personalities and
needs.
 Organizational sources reside in the structural make up
of organizations themselves.
 Sources of
Resistance to Change

Individual Organizational
 Habit  Structural inertia
 Limited focus of
 Security change
 Economic factors  Group inertia
 Fear of the unknown  Threat to expertise
 Threat to established
 Selective information power relationships
processing and resource
allocations
Overcoming
Resistance to Change
1. Education and communication
2. Participation
3. Building support and commitment
4. Developing positive relationships
5. Implementing changes fairly
6. Manipulation and cooptation
7. Selecting people who accept change
8. Coercion
Approaches to Managing
Organizational Change
 Lewin’s Three-Step Model of Change
 Kotter’s Eight-Step Model of the Change
Process
 Organizational Development
 Lewin’s Three-Step Model

 Lewin offers a three-step model to help facilitate the

change process.
 “unfreeze” individual resistance and group
conformity to help them move forward and then you
need to refreeze the changes by balancing driving
and restraining forces.
Lewin’s Three-Step Model…
 Unfreezing can be achieved by
 Increasing driving forces that direct behavior away from the
status quo
 Decreasing restraining forces that hinder movement from the
existing equilibrium
 Combining the two approaches
 Lewin’s Three-Step Model…
37

 Refreezing
 Once change has been implemented, to be successful
the new situation must be refrozen so it can be
sustained over time.
 Without this last step, change will likely be short-
lived and employees will attempt to revert to the
previous equilibrium state.
 The objective of refreezing, then, is to stabilize the
new situation by balancing the driving and
restraining forces.
 Kotter’s Eight-Step Plan
38

 Kotter also offers a model to look at change that builds on the

initial ideas of Lewin. He sets forth the following eight steps:
 1. Establish a sense of urgency by creating a compelling reason for
why change is needed.
 2. Form a coalition with enough power to lead the change.
 3. Create a new vision to direct the change and strategies for
achieving the vision.
 4. Communicate the vision throughout the organization.
 5. Empower others to act on the vision by removing barriers to
change and encouraging risk taking and creative problem solving.
 Kotter’s Eight-Step Plan
39

 6. Plan for, create, and reward short-term “wins”

that move the organization toward the new vision.
 7. Consolidate improvements, reassess changes, and
make necessary adjustments in the new programs.
 8. Reinforce the changes by demonstrating the
relationship between new behaviors and organizational
success.
 Kotter’s Eight-Step Plan
1. Create urgency 5. Empower others
2. Form coalition 6. Reward “wins”
3. Create new vision 7. Consolidate
4. Communicate the improvements
vision
Movement Refreezing

Unfreezing 8. Reinforce the change

 Organizational Development
 A collection of planned-change interventions that seek to
improve organizational effectiveness and employee well-
being.
 OD methods value human and organizational growth,
collaborative and participative processes, and a spirit of
inquiry.
 These are the underlying humanistic-democratic values in
most OD efforts.
 Respect for people
 Trust and support
 Power equalization
 Confrontation
 Participation
 OD Interventions
1. Survey Feedback
Gathering data and acting on it
2. Process Consultation
Using outside consultants
3. Team Building
Increase trust and openness
4. Intergroup Development
Change attitudes, stereotypes, and perceptions
5. Appreciative Inquiry
This process seeks to identify the unique qualities and special strengths
of an organization
This process includes discovery, dreaming, designing and destiny.
 Work Stress
 Stress: A dynamic condition in which an individual is
confronted with an opportunity, demand, or resource
related to what is desired and for which the outcome
is perceived to be both uncertain and important
 Types
 Challenge Stress – may improve performance
 Hindrance Stress – comes from obstacles to achieving
goals – mostly negative
 Managing Stress

Organizational Personal

 Employee selection  Time

 Training management
 Goal-setting  Physical activity
programs  Relaxation
 Job redesign techniques
 Organizational  Social support
communication network
 Wellness programs
Implications for Managers
 The need for change encompasses almost all
aspects of OB
 The real world is turbulent, requiring
organizations and their members to undergo
dynamic change if they are to perform at
competitive levels
 Managers must continually act as change agents
 Keep in Mind…

 Organizations and their members tend to resist

change
 It is unlikely that anyone approach to managing
change we best in every situation
POWER AND POLITICS
 Power
 Power: Power refers to the capacity one person has over
the other person to get the individual to do something.
 The capacity that A has to influence the behavior of B so
that B acts in accordance with A’s wishes.
 Two facets:
 Potential:
Power does not need to be actualized to be effective
 Dependency:
 Based on the available alternatives and their desirability
 The stronger the relationship or the dependency that one person has
when the other possesses something he/she wants or requires, the
greater the dependency on that person.
 Dependency: The key to Power
 The general dependency postulate: The greater B’s
dependency on A, the greater the power A has over B.
 When you possess anything that others require but that
you alone control, you make them dependent upon you
and therefore you gain power over them.
 The person who has the most need is the one most
dependent on the relationship
 Dependency is inversely proportional to the alternative
sources of supply.
 What Creates Dependency?

 Dependency is increased when the resource you control is

important, scarce, and cannot be substituted.
 Importance:
 If nobody wants what you have, there is no dependency.
 Scarcity:
 If something is plentiful, possession of it will not increase
your power. A resource must be perceived as scarce to
create dependency.
 Nonsubstitutability:
 The fewer substitutes for a resource, the more power comes
from control over that resource.
 Contrasting
Leadership and Power

Differences Leadership Power

Requires goal Only needs
Goal Compatibility
congruence dependence
Concerned with
Direction of Focuses on
influence in all
Influence downward influence
directions
Broader topic:
Emphasizes focuses on tactics
Research Emphasis
leadership style used by individuals
and groups
 Formal Bases of Power
 Power based on organizational position
 Coercive Power
Complies from fear of the negative results
 Reward Power
Complies due to desire for positive benefits
 Legitimate Power
From the formal authority to control and use organizational
resources
Personal Bases of Power
 Power stems from an individual’s unique
characteristics
 Expert: Influence wielded as a result of expertise,
special skill, or knowledge
 Referent: Based on identification with a person who has
desirable resources or personal traits
 Charisma
 Personal power is often more effective than formal
power.
 Effective Power Bases
 Expert and referent power are positively related
to performance and commitment
 Reward and legitimate power are unrelated to
organizational outcomes
 Coercive power is negatively related to employee
satisfaction and commitment
Power and Perceived Justice
 There are potential distortions in the perception of
justice related to individuals in power
 Compared to those who don’t have power, people
who have power
 May get more credit for successes
 May get more blame for failures

 Authorities who have a lot of power are given the

most trust when their organizations are operating
fairly
Power Tactics
 Power tactics: Used to translate power bases into
specific actions that influence others
 There are a number of power tactics individuals can
use or ways in which they can make the power base
work for them by moving people into specific actions.
 Some are more effective than others
 Nine Influence Tactics
1. Legitimacy- Claiming the authority or right to make a
request, or showing that it supports organizational goals
or policies.
2. Pressure- Using demands, threats, and reminders to get
someone to do something.
3. Rational persuasion- Using facts and data to make a
logical or rational presentation of ideas.
4. Coalitions- getting the support of other people to
provide backing when making a request.
5. Inspirational appeals- Appealing to values, ideals, and
goals when making a request.
Nine Influence Tactics
6. Consultation-Getting others involved to
support one’s objectives.
7. Exchange-Offering favours or benefits in
exchange for support.
8. Personal appeals-Appealing to loyalty and
friendship when asking for something.
9. Ingratiation-Using flattery, creating goodwill,
and being friendly prior to making a request.
 Influence Tactic Effectiveness
 Most effective
 Rational persuasion
 Inspirational appeals
 Consultation

 Least effective
 Pressure
 Combining tactics increases effectiveness
 Direction, sequencing, individual skill, and
organizational culture modify effectiveness
 Politics: Power in Action
 Politics occur when employees convert power into action

 Organizational Politics: Activities not required as part

of one’s formal role in the organization, but that
influence, or attempt to influence, the distribution of
advantages and disadvantages within the organization

 Outside of job requirements

 Requires the use of power
 Legitimacy of
Political Behaviors
 Based on sticking to the implied rules
 Legitimate
 Normal everyday politics – complaining
 Illegitimate
 “Illegitimate political behavior is more extreme and
violates the implied rules of the game such as sabotage,
whistle blowing and symbolic protest.
 The Reality of Politics

 Politics arise in organizations because of

 Conflicting interests
 Limited resources
 Ambiguity in decision making

 Politicking: Twisting facts to support one’s own

goals and interests
 Individual Factors Contributing to Political
Behavior

 Traits that encourage political action

 High self-monitors
 High need for power

 Situational influences leading to illegitimate

political actions
 Lower organizational investment
 Greater the number of perceived alternatives
 Greater expectations of success
Organizational Factors Contributing to Political
Behavior

 Organizational resources declining or distribution shifting

 Opportunity for promotion exists
 Organizational culture issues
 Low trust
 Role ambiguity
 Zero-sum reward allocation
 Democratic decision making
 High performance pressures
 Leading by poor example
 Unclear performance evaluation systems
 Responses to
Organizational Politics
 For those unwilling to play, or with modest political
skills, the outcomes are negative
 Most employees will not engage in a high level of
politics and often react negatively to politics.
 Their reactions include decreased job satisfaction, increased
anxiety and stress, increased turnover and a reduction in
performance.
 The Ethics of Behaving Politically
Questions to consider:

1. What is the utility of engaging in the

behavior?
2. How does the utility of engaging in the
political behavior balance out any harm it will
do to others?
3. Does the political activity conform to standards
of equity and justice?
 Implications for Managers

 Power can be increased by:

 Increasing the dependence of others
 Gaining unique knowledge or skills
 Minimizing one’s own dependence
 Acquiring useful bases of power
 Using effective power tactics
 Avoiding coercion
 Keep in Mind…

 Informal, expert, and referent power are the most

important
 Use consultation and inspirational appeals
 69

CONFLICT MANAGEMENT
Conflict Defined
70

 Conflict: Process that begins when one party

perceives that another party has negatively affected,
or is about to negatively affect, something that the
first party cares about
 Conflict primarily deals with perception.
 It can be that the goals of the individuals are incompatible or
there is a difference of opinion over the interpretation of facts.
 Many conflicts also arise through disagreements about how people
should behave.
 Transitions in Conflict Thought
71

 Traditional View
All conflict is harmful and must be avoided
 Interactionist View

Conflict is encouraged to prevent group from

becoming stale. However, dysfunctional conflict
should be avoided , controlled or minimized.
 Managed Conflict/resolution-focused View

Conflict is inevitable but we should focus on

productive conflict resolution
 Functional vs. Dysfunctional Conflict
72

 Functional: improves group performance

 Dysfunctional: hinders group performance

 You can assess the focus of conflict by looking at

either task, relationship or process.
 Assessing focus of conflict:
 Task – work content and goals
 Relationship – interpersonal
 Process – how the work is done
 Desired Conflict Levels
73

Level of Conflict
Source of
Conflict Low Moderate High

Task Functional Dysfunctional

Relationship Dysfunctional

Process Functional Dysfunctional

 Desired Conflict Levels…
74

 If task conflict exists at low to moderate levels then

this is a functional conflict that can help individuals
seek clarification or new ideas on how to
accomplish their goals.
 Relationship conflict is based on problems between
individuals and is almost always dysfunctional.
 Process conflict occurs when there is disagreement
on how the work gets done. Low levels of process
conflict represent functional conflict.
 The Conflict Process
75
 Stage I: Potential Opposition
76

 Three main conditions that can cause conflict:

 Communication
 Barriers exist
 Too much or too little
 Structure
 Group size, age, diversity
 Organizational rewards, goals, group dependency
 Personal Variables
 Personality types
 Emotionality
Stage II: Cognition and Personalization
77

 Potential for conflict is actualized

 Parties “make sense” of conflict by defining it
and its potential solutions
 Emotions play a major role in shaping
perceptions
 Perceived conflict – awareness needed for
actualization
 Felt conflict - emotional involvement - parties
experience anxiety, tension, frustration, or hostility
 Stage III: Intentions
78

 Intentions: The decision to act in a given way

 Inferred (often erroneous) intentions may cause
greater conflict
 Stage III: Intentions…
79

 Stage three starts to look at the intentions of the

individuals involved.
 These intentions include the determination to act in a
certain way, but it is important to realize behavior
does not always accurately reflect intention.
 There are competing dimensions of conflict-handling
intentions.
 One can be motivated by cooperativeness or
attempting to satisfy the other party’s concerns or
assertiveness, attempting to satisfy one’s own concerns.
Stage IV: Behavior
80

 Stage four moves us beyond intentions to the chosen

behavior in the conflict.
 Where conflict becomes visible
 Usually overt attempts to implement each party’s
intentions
 May become an inadvertent stimulus due to
miscalculations or unskilled enactments
 Functional conflicts: confined to lower range of
continuum – subtle, indirect, and highly controlled
 Dysfunctional conflicts: upper range – highly
destructive activities such as strikes and riots
Stage V: Outcomes
81

 Stage five looks at the outcomes of conflict resolution.

 Functional:
 Improves decision quality

 Stimulates creativity and innovation

 Encourages interest and curiosity

 Problems are aired

 Accepts change and self-evaluation

 Dysfunctional:
 Group is less effective

 Cohesiveness and communications are reduced

 Leads to the destruction of the group

 Creating Functional Conflict
82

 Managers can reward dissent and punish

conflict avoiders
 Managers must learn to accept bad news
without sending cues that conflict is
unacceptable
 Conflict Management Strategies
83

 Conflict researchers often use dual concern theory to

describe people’s conflict management strategies.
 Dual concern theory considers how one’s degree of
cooperativeness (the degree to which one tries to
satisfy the other person’s concerns) and assertiveness
(the degree to which one tries to satisfy one’s own
concerns) determine how a conflict is handled.
 The five conflict-handling strategies identified by the
theory are as follows: Forcing, Problem solving,
Avoiding, Yielding, Compromising).
 Conflict Management Strategies…
84

 Forcing- Imposing one’s will on the other party.

 Problem solving- Trying to reach an agreement that
satisfies both one’s own and the other party’s
aspirations as much as possible.
 Avoiding- Ignoring or minimizing the importance of the
issues creating the conflict.
 Yielding- Accepting and incorporating the will of the
other party.
 Compromising- Balancing concern for oneself with
concern for the other party in order to reach a solution.
 Conflict Management Strategies…
85

 Choosing a particular strategy for resolving conflict

depends on a variety of factors.
 Research shows that while people may choose among the
strategies, they have an underlying disposition to handle
conflicts in certain ways.
 Some situations call for particular strategies. For
example, when a small child insists on trying to run into
the street, a parent may need a forcing strategy to
restrain the child. Co-workers who are having a conflict
over setting deadlines to complete a project on time may
decide that problem solving is the best strategy to use.
 Global Implications
86

 Culture influences conflict resolution

strategies
 Collectivist cultures try to use indirect
methods to preserve relationships
 Promote the good of the group as a whole
 Individualist cultures confront differences of
opinion directly and openly
 Implications for Managers: Managing
Conflict
87

 Use in the appropriate situations:

 Competition – quick action is vital
 Collaboration – to gain commitment with
consensus
 Avoidance – the issue is trivial
 Accommodation – when you’re wrong
 Compromise – opponents have equal
power and hold mutually exclusive goals
Keep in Mind…
88

 Conflict is an inherent part of organizational

life: probably necessary for optimal
organizational function
 Task conflict is the most constructive
 89

ORGANIZATIONAL
DESIGN &
STRUCTURE
 What Is Organization Structure?
90

 It defines how job tasks are formally divided,

grouped, and coordinated
 Key elements to be addressed:
 Work specialization
 Departmentalization
 Chain of command
 Span of control
 Centralization
 Decentralization
 Formalization
 Element 1:
Work Specialization
91

 Work specialization: Describes the degree to

which activities in the organization are
subdivided into separate jobs
 Also known as division of labor
 Benefits
 Greater efficiency and lower costs
 Costs
 Human costs when carried too far
 Job enlargement as a solution
Element 2: Departmentalization
92

 Departmentalization: Departmentalization defines

how jobs are grouped together so that common
tasks can be coordinated
 Common bases:
 Function
 Product
 Geography
 Process
 Customer
 When jobs are grouped, departments are formed.
Element 3: Chain of Command
93

 Chain of command: Unbroken line of authority that

extends from the top of the organization to the lowest
echelon and clarifies who reports to whom
 Authority: positional rights
 Unity of command- is the idea that a subordinate should have
only one superior to report to so that directions and the chain of
command are clear.
 Fewer organizations find this is relevant- As organizations
change this concept is becoming less and less important.
 Element 4: Span of Control
94

 Span of control: The number of employees a manager

is expected to effectively and efficiently direct
 Determines the number of levels
 Trend is toward wider spans of control
 Wider span depends on knowledgeable employees
 Affects speed of communication and decision making
 Wider span allows for more efficiency because you
need fewer managers. However, it can also limit the
amount of time and direction managers can give to their
employees.
Element 5: Centralization and Decentralization
95

 Centralization : Degree to which decision making is

concentrated at a single point in the organization
 Decentralization represents an organization that
spreads decision making throughout the
organization.
 Only includes formal authority: positional rights
 Highly centralized when top managers make all the decisions
 Decentralized when front line employees and supervisors make
decisions
 Trend is toward increased decentralization
 Centralization or Decentralization
96
 Element 6: Formalization
97

 Formalization: Degree to which jobs within the

organization are standardized
 When there is high formalization workers have very little
control over how they do their work and they will be
required to follow a number of rules and procedures.
 Lower formalization will tend to allow for different job
behaviors to get the job done, giving workers more
control over their work.
Common Organizational Designs
98

 Simple structure
 Bureaucracy
 Matrix structure
 Simple Structure
99

 Low degree of departmentalization

 Wide spans of control
 Authority centralized in a single person
 Little formalization in job design
 Difficult to maintain in anything other than small
organizations
 Bureaucracy
100

 In a bureaucratic organization there

will be a great deal of structure.

 Highly routine operating tasks

achieved through specialization

 Formal rules and regulations

 Centralized authority
 Narrow spans of control
 Tasks grouped by functional departments
 Decision making follows the chain of command
 Organization that is highly defined and very
controlled.
 Matrix Structure
101

 Combines two forms of departmentalization

 Functional
 Product
 Creates dual chain of command
 Advantages
 Facilitates coordination and efficient
allocation of specialists
 Disadvantages
 Possible confusion, fosters power struggles, stress
 New Design Options: Virtual
102

 Virtual: A small core organization that outsources its

major business functions
 also sometimes called the network, or modular,
organization
 Highly centralized with little or no departmentalization
 Provides maximum flexibility while concentrating on what
the organization does best
 Reduced control over key parts of the business
 The Boundaryless Organization
103

 Boundaryless organization:
 Eliminates the chain of command
 Has limitless spans of control
 Replaces departments with empowered teams
 Breaks down geographical barriers
 Boundaryless organizations also try to breakdown
external barriers to customers and suppliers through their
structure and style of communication
 External boundaries can be reduced through globalization,
strategic alliances, customer-organizational links, and
telecommuting
 The Leaner Organization:
104
Downsizing

Downsizing: A systematic effort to make an

organization leaner by selling off business units,
closing locations or reducing staff
The goal is to improve agility by creating a lean,
focused, and flexible organization.
 Controversial because of the negative impact on
employees
 Impact on organizational performance has been
very controversial
 Two Models of Organizational
105
Design
Forces Influencing Structure
 Structural decisions are influenced by:
 Overall strategy of the organization
 Size of the organization

 Technology use employed by the organization

 Degree of environmental uncertainty

 Forces Influencing Structure…
107

 Strategy
 Innovation – introduce new offerings - organic
 Cost-minimization – cost control – mechanistic
 Organization Size
 Bigger becomes mechanistic
 Technology
 Routine equals mechanistic, non-routine is organic
 Environment
 Dynamic environments lead to organic structures
 Organizational Designs and Employee
Behavior
108

 Organizational design is not a good predictor of

employee behavior.
 Research has shown that work specialization can lead
to increased productivity but lower job satisfaction.
 Span of control has mixed results depending on
individual differences in employees and organizational
factors.
 Consider employee preferences for
 Work specialization
 Span of control
 Centralization
 In-class exercise
109

What are the five kinds of approaches to organizing?

Which of the approaches would you recommend for each
of the following? Why?
 1. A company manufacturing and marketing one product
 2. A company with sales offices located in forty areas
 3. A company having customers of different needs and
problems which can be met by a specialists
 4. A retail department store
 5. A company manufacturing and marketing different product
lines
 Implications for Managers
110

 Structure does have an impact on both the attitudes

and behaviors of the people within the organization
so it is important that managers effectively select and
utilize structure within their organizations.
 Keep in Mind…
111

 As tasks become more complex and required skills more

diverse, more use of cross-functional teams
 Structure plays a critical role but it is dependent upon
context, so be sure to select a structure you can grow with.
 Simple structures are easy to create but difficult to grow
 As the world becomes more global and business
relationships more fluid, external boundaries will be
reduced.
 External boundaries can be reduced through
globalization, strategic alliances, customer-organizational
links, and telecommuting